A Financial Industry Regulatory Authority Panel is ordering Mid Atlantic Capital Corp. to pay David Wellman and Beverly Bien $922K. The married couple sued the independent brokerage firm for losses they sustained after they invested in Sonoma Ridge Partners (a real estate private placement), KBS-sponsored nontraded REITs, silver and gold exchange-traded funds (ETFs) like iShares Silver and Market VectorsGold Minors, and Contago Oil and Gas securities. They alleged that Mid Atlantic Capital Corp. was liable for negligent misrepresentation, negligence, omissions, breach of fiduciary duty, breach of contract, negligent supervision, restitution, common law fraud, and violation of Colorado’s Securities Act.
The couple was close to retirement age when they made the investments several years ago prior to the 2008 economic collapse. According to the couple’s legal team, among the issues that they believe were problematic is that Mid Atlantic’s two brokers that managed Sonoma Ridge Partners were not the same brokers who marketed and sold the private placement to investors. The claimants believe that this presented a conflict of interest.
Previously called the Jadda Secured Senior Mortgage Fund, Sonoma Ridge Partners was promoted as an alternative to low-yielding CD’s, as well as to the stock market with its volatility. It was supposed to render 9-11% annual yields. Also, although Bien bought most of the illiquid real estate investments, she lacked the required net worth necessary to qualify as an accredited investor under private placement industry rules.
Now, Mid Atlantic Capital must pay Bien $240K for her initial investment loss and $436K in compensatory damages. The firm must pay $47K to Wellman in compensatory damages and $52K for an initial investment to both Bien and Wellman, along with $119K in their legal fees and $27K in other cost.
A spokesman for Mid Atlantic Capital said that it disagrees with the ruling.
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